CROSSROADS Exhibit 99.1
PRESS RELEASE
For more information on Crossroads Systems, please contact:
Andrea C. Wenholz
Crossroads Systems, Inc.
512.928.6897
800.643.7148
info@crossroads.com
CROSSROADS SYSTEMS REPORTS FOURTH QUARTER,
FISCAL 2003 FULL YEAR RESULTS
AUSTIN, Texas - Dec. 2, 2003 - Crossroads Systems, Inc. (Nasdaq: CRDS), a
leading provider of connectivity for storage networking solutions, today
reported results for its fiscal fourth quarter (Q4'03) and fiscal year that
ended Oct. 31, 2003.
"During the year, we executed on our goals by enhancing our relationship with
our largest customer, maintaining our leadership in storage routing, expanding
our customer base with a new OEM relationship based on our ServerAttach
technology, and extending the value of our patented technology through license
agreements," said Rob Sims, Crossroads president and chief executive officer.
"We believe we are now in a position to expand our business with existing as
well as new customers, and execute our strategy to deliver innovative products
into new markets."
FISCAL FOURTH QUARTER 2003
Total revenue for Q4'03 was $9.3 million, an increase of 65% from $5.6 million
for the fiscal third quarter 2003 (Q3'03). This compares with $8.2 million for
the fiscal fourth quarter 2002 (Q4'02). The fourth quarter revenue increase is
the result of additional IP licensing revenue, a new OEM relationship and
stronger demand from existing OEM customers. For the fiscal first quarter 2004,
Crossroads expects continued growth in product and royalty revenue, but
anticipates total revenue to be lower quarter over quarter based on the
fluctuating nature of IP license revenue.
Crossroads improved its gross margin percentage to 66% in Q4'03 from 53% in
Q3'03 and 31% in Q4'02, resulting primarily from the royalty model and IP
license revenue.
Net loss for Q4'03 was $317,000, or $0.01 per share, compared with $1.7 million,
or $0.07 per share, for Q3'03, and $5.4 million, or $0.21 per share, for Q4'02.
The company ended the year with $31.4 million in cash, cash equivalents and
short-term investments compared with $30.0 million in Q3'03.
FISCAL YEAR 2003
Total revenue for fiscal year 2003 was $33.1 million, compared with $34.0
million for fiscal year 2002. Gross profit for fiscal year 2003 was $15.7
million compared with $11.3 million for fiscal year 2002, resulting primarily
from the royalty model and IP license revenue. Net loss for fiscal year 2003 was
$6.4 million, or $0.26 per share, compared with $25.5 million, or $0.95 per
share, for fiscal year 2002.
- MORE -
CROSSROADS
RECENT OPERATIONAL HIGHLIGHTS:
o HITACHI, CROSSROADS LICENSE TECHNOLOGY: In a separate news release
distributed today, Crossroads announced an agreement with Hitachi Ltd.,
a global leader in the storage market, under which both companies will
cross-license their patented access control technology.
o EMC SELECTS CROSSROADS TO CONNECT SERVERS TO NETWORKED STORAGE: During
the quarter, Crossroads began shipping product to EMC. This agreement
established Crossroads as a qualified solutions provider to EMC for
embedded Fibre Channel connectivity of iSeries servers into external
EMC storage arrays, including EMC Symmetrix(R) and Symmetrix DMX(TM)
systems.
o FIFTH GENERATION ROUTER LAUNCHED WITH STORAGETEK: StorageTek(R)
(Storage Technology Corporation) and Crossroads jointly announced
availability of the StorageNet(R) 3300 (SN3300) Fibre Channel Router
designed to bring SCSI tape libraries into the storage area network
(SAN). Both the SN3300 and the complimentary SN3400 (as previously
announced) deliver the benefits of Crossroads fifth generation products
to StorageTek's L-series tape library customers.
o MICROSOFT iSCSI WHQL-QUALIFICATION FOR THE WINDOWS PLATFORM: Crossroads
announced qualification of Internet SCSI (iSCSI) interoperability under
Microsoft's Designed for Windows Logo Program. Under the program,
Crossroads has successfully completed testing to help ensure
interoperability with the Microsoft iSCSI software initiator and the
Windows platform. Crossroads' iSCSI technology enables SCSI commands to
be carried over IP networks in order to facilitate data transfers over
more cost-effective IP-based SANs.
BOARD OF DIRECTORS UPDATE:
In November 2003, the Crossroads Board of Directors voted to appoint Rob Sims as
its newest member.
CONFERENCE CALL:
Crossroads will hold a conference call (773-756-4619; passcode: CROSSROADS) and
simultaneous webcast (www.crossroads.com) at 3:30 p.m. (CST) today. An audio
replay of the call will be available from Dec. 3 - 12 by calling 402-220-9725 or
by visiting the Crossroads web site.
ABOUT CROSSROADS SYSTEMS, INC.
With headquarters in Austin, Texas, Crossroads Systems (Nasdaq:CRDS) is a
leading global provider of data routing solutions for Storage Area Networks.
Crossroads' solutions serve the growing storage connectivity and data storage
markets, and are designed to help companies store, manage and ensure the
integrity and availability of their data. Crossroads' products are in solutions
from companies such as EMC, HP and StorageTek, and are distributed through
partners such as ARROW, Bell Micro, DLT Solutions, Info-X, Promark, and
TidalWire. Crossroads is a voting member of the Storage Networking Industry
Association (SNIA). For more information about Crossroads Systems, please visit
www.crossroads.com or call 800/643-7148.
FORWARD-LOOKING STATEMENTS
This release may include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The words "believe," "expect,"
"intend," "plan," "project," "will" and similar phrases as they relate to
Crossroads are intended to identify such forward-looking statements. These
statements reflect the current views and assumptions of Crossroads, and are
subject to various risks and uncertainties that could cause actual results to
differ materially from expectations. Among the important factors that could
cause actual results to differ materially from those in the forward-looking
statements are: the quarterly fluctuations of Crossroads' operating results and
Crossroads' inability to accurately predict revenue and budget for expenses for
future periods; the extent to which Crossroads will maintain positive cash flow;
the company's ability to maintain its operating margins; the deteriorating
economic environment, including, in particular, related expense reductions by
organizations affecting their IT spending and budget; the dependence of
Crossroads' business on the storage area network market which is evolving and
unpredictable; the possibility that the pending shareholder class action
lawsuits could result in an adverse outcome to the company; Crossroads' ability
to develop new and enhanced products that achieve market acceptance, in
particular with respect to the launch of the ServerAttach product; the effect of
competition; the effect of undetected software or hardware errors, which may
CROSSROADS
affect the company's results or reduce demand for Crossroads' products in the
long term; Crossroads' inability to protect its intellectual property rights,
including any adverse outcome in the company's pending patent litigation with
certain of its competitors; the continuation of Crossroads successful
relationships with its limited number of OEM customers; Crossroads' ability to
retain and recruit key personnel to manage its business successfully; any
negative effect which may result from changes to executive management;
Crossroads' ability to successfully achieve the benefits of any subsequent
acquisition or strategic relationship; and that Crossroads' stock price could be
volatile regardless of Crossroads' actual financial performance and other
factors detailed in Crossroads' filings with the Securities and Exchange
Commission. Crossroads expressly disclaims any obligation to release publicly
any updates or revisions to any forward-looking statements to reflect any
changes in expectations, or any change in events or circumstances on which those
statements are based, unless otherwise required by law.
--TABLES ATTACHED--
# # #
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<Table>
<Caption>
JULY 31, OCTOBER 31,
2003 2003
-------- -----------
ASSETS
Current assets:
Cash, cash equivalents and short-term investments .......... $30,022 $31,377
Accounts receivable, net ................................... 2,728 2,994
Inventories, net ........................................... 2,209 1,633
Prepaids and other current assets .......................... 987 1,274
------- -------
Total current assets ................................... 35,946 37,278
Property and equipment, net .................................... 3,886 3,299
Other assets ................................................... 345 288
------- -------
Total assets ........................................... $40,177 $40,865
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................... $ 1,591 $ 1,953
Accrued expenses ........................................... 3,158 3,272
Deferred revenue ........................................... 500 382
------- -------
Total current liabilities .............................. 5,249 5,607
Stockholders' equity ........................................... 34,928 35,258
------- -------
Total liabilities and stockholders' equity ............. $40,177 $40,865
======= =======
</Table>
CROSSROADS SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share and Per Share Data)
<Table>
<Caption>
THREE MONTHS ENDED FISCAL YEAR ENDED
OCTOBER 31, OCTOBER 31,
------------------------------- -------------------------------
2002 2003 2002 2003
------------ ------------ ------------ ------------
Revenue:
Product ......................................... $ 8,091 $ 4,511 $ 33,429 $ 25,955
Royalty and other ............................... 141 4,764 559 7,188
------------ ------------ ------------ ------------
Total revenue ............................... 8,232 9,275 33,988 33,143
Cost of revenue (1):
Product ......................................... 5,663 2,580 22,486 16,598
Royalty and other ............................... 47 598 175 835
------------ ------------ ------------ ------------
Total cost of revenue ....................... 5,710 3,178 22,661 17,433
------------ ------------ ------------ ------------
Gross profit ......................................... 2,522 6,097 11,327 15,710
------------ ------------ ------------ ------------
Operating expenses (1):
Sales and marketing ............................. 1,053 1,475 6,126 4,508
Research and development ........................ 3,134 2,866 16,520 11,929
General and administrative ...................... 3,012 1,926 9,158 6,209
Business restructuring expense .................. -- (91) 3,666 (432)
Impairment of intangibles and other assets ...... 838 -- 2,047 --
Amortization of intangibles ..................... 70 -- 278 173
------------ ------------ ------------ ------------
Total operating expenses .................... 8,107 6,176 37,795 22,387
------------ ------------ ------------ ------------
Loss from operations ................................. (5,585) (79) (26,468) (6,677)
Interest income ...................................... 198 72 979 540
------------ ------------ ------------ ------------
Loss before income taxes ............................. (5,387) (7) (25,489) (6,137)
Income tax expense ................................... -- (310) -- (310)
------------ ------------ ------------ ------------
Net loss ............................................. $ (5,387) $ (317) $ (25,489) $ (6,447)
============ ============ ============ ============
Basic and diluted net loss per share ................. $ (0.21) $ (0.01) $ (0.95) $ (0.26)
============ ============ ============ ============
Shares used in computing basic and
diluted net loss per share ...................... 26,066,057 24,336,846 26,878,387 24,443,141
============ ============ ============ ============
</Table>
- ----------
(1) The Company allocates stock-based compensation to specific line items
within the statement of operations based on the classification of the
employees who received the benefit. Stock-based compensation for the
periods indicated was allocated as follows:
<Table>
<Caption>
THREE MONTHS ENDED FISCAL YEAR ENDED
OCTOBER 31, OCTOBER 31,
------------------ ------------------
2002 2003 2002 2003
------ ------ ------ ------
Cost of revenue ............................. $ 17 $ 13 $ 84 $ 36
Sales and marketing ......................... 84 1 481 116
Research and development .................... 94 57 369 294
General and administrative .................. 1,833 437 3,640 1,017
------ ------ ------ ------
Total stock-based compensation ... $2,028 $ 508 $4,574 $1,463
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</Table>